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November 09, 2016
Monday we wrote that the market typically moves based on variances from
expectations. Yesterday’s election is an obvious example as the market had predicted,
with high odds, a Clinton win thus, the strong rally over the last couple of days. Since
the Trump victory was unexpected by markets around the world, the variance from
expectations will cause a market sell off on the opening today. However, this should be
considered an opportunity rather than a reason to panic or otherwise make emotional
decisions. We believe once nerves calm, the Trump economic agenda of lower taxes and
reduced regulation will be beneficial to U.S. Economic growth going forward.
We previously said a Trump win would cause a near term market reaction. The DJIA
futures were down over 800 points at the lows overnight. Already as this post is being
written, the futures have improved significantly and we would simply be back to about
Friday’s closing level. We have identified several positions we would buy if our entry
points are reached. We believe the market will be volatile short term but will resume
the upward trend soon. Under a Trump administration, we expect GDP growth to nearly
double over time which will benefit corporate earnings and therefore stock prices.
Once again, as we wrote Monday of this week, “Short term; might have to hold on to your
hat as the winds of uncertainty cause volatility near term. We continue to strongly
believe that patience here will be rewarded.”